The U.S. Fed’s announcement in October that it was ending quantitative easing capped a tough month for precious metal producers. The news triggered another wave of selling in gold dropping under $1,200 and silver falling even more aggressively to under $16. The fall only compounds challenges for producers whose third quarter results already show stress from the metal prices.
A technical perspective shows the breach of $1,180 area, a key support level, creating more problems for gold. Unless the price can recover back and hold above, the next downside target should take the price to the $1,088 Fibonacci support area.
The renewed wave of fear has hit gold-silver stocks very hard with 2008 lows now being re-tested. If the gold-silver prices can find a bottom soon, and it could have very well put in reversal lows this past week, then I expect that these stock prices will reverse dramatically. But until the fear of much lower gold and silver prices subsides, negative pressures will dominate and volatility will be at historic levels.
SEABRIDGE GOLD continues to expand its KSM deposit, with new drill results expanding the potential of the Iron Cap Lower Zone including an impressive 593 metre-intercept grading 1.14 g/t gold and 0.37% copper. The company has traced the zone for 750 metres and it is still open to the north and at depth. With so many results coming in Seabridge expects to have a first resource estimate out on the new zone in the first quarter of 2015.
The company has also secured early construction permits for the KSM project, including roads, camps, and some mine facilities. In addition, the company secured critical rights to build a tunnel to connect the future mine and processing facilities. November could be a big month for de-risking KSM as they are expecting a final decision on their Federal environmental assessment.
EXETER RESOURCES is back on the hunt for water so it can develop its huge gold-copper Caspiche project in the arid plains of Chile. The company announced in June that it thought it was close to finding a significant water resource and has since been busy testing the source. In early October the company said it was expanding the drill program to test the water source, budgeting $1.6 million to see if the aquifer can sustain the 200 litres per second flow rate needed to operate any three scenarios of the new Caspiche mine plans.
The company announced economic assessments on three new mine plans in May that contemplate a 30,000 to 90,000-tonne per day mine. A 2012 mine plan stipulated a 150,000-tonne-per-day mine that would have required 1,000 litres per second to operate.
GOLD RESOURCE CORP saw production fall at its southern Mexican gold mine, with output falling 28% compared to the first half quarterly average. Still the company produced 17,200 oz. of gold equivalent and is within striking distance of the lower end of their annual production goal.
The reduced production was related to slower-than-expected mine development, but the company has hired Oscar Zelaya a new general manager of its EL Aguila project to help fix the problems. Zelaya brings almost 30 years of industry experience to the job and last worked as general manager at Endeavour Silver.
Despite the production setback the company still continued to pay shareholders a dividend in October, setting it at $0.01 per share.
Producers everywhere have been hit by lower gold prices, including TIMMINS GOLD which saw earnings drop from $9.3 million in Q3 2013 to $3.9 million in the last quarter. The company attributes the drop to lower gold prices and less ounces sold. Timmins Gold also dealt with very high rainfall at its Sonora, Mexico operation, which limited access to the San Francisco pit and in turn led to lower production.
The company had $50.2 million in cash at the end of September, a big increase from the $14.4 million it had on hand at the same time last year.
INCA ONE GOLD continues to work on expanding processing capacity at its gold operations in Peru, recently taking delivery of its second 50-tonne-per-day ball mill. The company, which processes material from small-scale local miners, expects to commission the mill by the end of the year to double its capacity.
The company also signed its first multi-delivery agreement to buy 350 tonnes per month of mill feed from a permitted miner in Peru. The company bought its first mill in 2013 and has since been working to transition from an exploration company into an ore processing operation.
TIMBERLINE RESOURCES continues to restructure, recently approving a 1 for 12 share rollback effective October 31. The reverse stock split, which will bring total shares out to 9.9 million, will allow the company to continue trading on the NYSE MKT as well as the Venture, according to company CEO Paul Dircksen.
The company continues to advance its Butte Highlands gold project, with Montana outlining an environmental assessment timeline that should have a final environmental impact statement out by the end of 2014. Timberline then expects to have a record of decision early in 2015.
While gold prices have been hit lately silver prices are hurting producers even more.
SILVERCREST MINES, a successful Mexican miner managed to boost silver production by an impressive 90% to 385,000 oz., while gold production dropped 2% to 7,085 oz. gold. Investors have to wait until November 12 to see how the companies’ financials played out in the quarter.
In the last quarter the company also commissioned the new mill at the Santa Elena mine that is currently averaging 2,500 tonnes per day. The company is moving the mine from an open pit heap leach operation to an underground mine with mill.
SANTACRUZ SILVER had a busy month, with a successful financing and a economic assessment out on its San Felipe project in Mexico. The company raised $28.4 million in a pre-paid silver purchase agreement with JMET, agreeing to sell 4.6 million oz. silver through to 2019.
The company will use the money to fund development at San Felipe, where a recent PEA outlined a mine producing 3.2 million oz. silver a year for 7.5 years at an all-in cash cost of $12.72 oz. silver. The financials worked out to an NPV of $104 million at a 5% discount rate and a pre-tax IRR of 61% using a $19.91 per oz. silver base case.
Meanwhile, the company produced 184,900 silver eq. oz. in the quarter at its Rosario mine in Mexico, a 10% increase over the previous quarter. The company is working to increase milling capacity at the mine, where it’s currently producing 325 tonnes of ore a day but only has milling capacity of 300 tpd.
Keeping with silver producers, FORTUNA SILVER had a strong quarter, increasing silver production by 63% to 1.8 million oz., gold production by 116% to 9,751 oz., and 11% increases in zinc and lead production, all compared with the third quarter 2013.
The company also managed to increase resources with an update at the end of September. The company increased silver reserves by 26% and inferred silver resources by 67% at its San Jose mine in Oaxaca Mexico. Reserves now stand at 31.2 million oz. silver and 243,000 oz. gold, and inferred resources total 59 million oz. silver and 401,000 oz. gold.
Peter Spina
President, GoldSeek.com & SilverSeek.com
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